Interview, Fireside Chat
a16z Podcast | The Curious Case of the OpenTable IPO
- Standard IPO timelines typically span six to eight months, though OpenTable's specific process required eight months, with informal banker conversations beginning 18 months prior to formal selection.
- A standard 108-day investor lockup is common, though exceptions exist where investors lock up for 180 days to align with long-term monetization cycles.
- Selling all insider and management stock immediately after a 180-day lockup expiration could theoretically drive the stock price down to $2.
- A small IPO float of $70 million is anticipated to cause significant illiquidity and massive price gaps, whereas a higher mid-20s pricing could have raised more capital but risked long-term stability.
- Companies rushing to exit as IPO windows close often underperform, while those waiting for improved investor sentiment typically perform well.
- Sustained growth rates in the 40% range are required to be perceived as strong growth stocks, compared to teens or 20% which may lack market appeal.
- Preparation involves meeting 10 potential institutional investors every six months to build a "soft track record," with roadshows often consisting of approximately 42 meetings over 2.5 weeks.
- Management teams must maintain identical presentations and responses across all cities to comply with Fair Disclosure (Regulation FD), while "testing the waters" meetings have become more formalized and accessible post-JOBS Act.
- Management should prioritize business readiness and team capability over market timing, ideally ensuring confidence to exceed expectations for the first X quarters with untested initiatives ready.
- Providing detailed transparency on business drivers allows investors to build models even without formal quarterly guidance, as large business models often become predictable via the law of large numbers.
- Going public too early risks making the business unpredictable, while delaying too long may cause the company to miss the high valuation multiples associated with growth stocks.
- The IPO process creates significant distraction, requiring the board and management to isolate the process from the rest of the workforce.
- Uncertainty remains regarding the necessity of guidance to balance investor expectations with the strategic freedom to innovate based on new learning.